Iraq’s Oil Minister said Russia’s LUKoil-led group has begun pumping oil from the massive West Qurna-2 oil field in southern Iraq.
At an inauguration ceremony, Abdul-Karim Elaibi announced that production had started at 120,000 barrels per day increasing to 400,000 barrels per day by the end of this year.
The 14 billion barrel field is 490 kilometres southeast of Baghdad. A production plateau of 1.2 million barrels per day is expected to last for nearly 20 years.
Analysts say the field will play a major part in driving up production to new highs in the Middle Eastern country and potentially force down the price of crude.
Starting production at Iraq’s West Qurna-2 oil field shows LUKoil sees Iraq as one of its most valued assets. LUKoil President Vagit Alexperov said Russia’s number two oil producer positioned itself as a strategic player with the launch of operations at the West Qurna-2 field.
“The start of production at West Qurna-2 is strategically important for LUKoil,” he said in astatement on 29 March.
LUKoil has pressed ahead with its overseas operations despite the threat of sanctions being imposed on Russian companies by the US and the European Union over Russian President Vladimir Putin’s illegal annexation of Crimea. LUKoil saw its production rise 1.1% in 2013 and is aiming for a 1.5% rise in 2014 with the boost from West Qurna-2.
West Qurna-2 is estimated to hold up to 14 billion barrels of recoverable reserves, making it among the largest undeveloped fields in the world.
The Organization of Petroleum Exporting Countries(OPEC) saidin its March market report Iraq was one of the bright spots in terms of crude oil output.
Iraqi oil production from January to February, the last full month for which data are available from OPEC, increased 13% to 3.3 million barrels per day. Baghdad currently operates outside the oil cartel’s quota system, which helps to maintain oil prices above $100 per barrel, the figure seen by most of its members including Saudi Arabia as vital for their economies to function.
Iraqi exports are also due to get an additional boost in April from Kurdistan, which recently agreed to resume pumping 100,000 barrels per day as a “gesture of goodwill” aimed at easing a bitter dispute with the Baghdad government. A lot of major companies recently prefer to do business with Kurdistan than dealing with the federal government in Baghdad.
The resurgence of Iraq’s oil production comes amid hopes that neighbouring Iran will soon boost production if sanctions are lifted.
Since 2003, Iraq has awarded dozens of oil and gas deals to international energy companies — the first major investments in the country’s energy industry in more than three decades. The world’s leading oil companies have been expanding other giant fields in Iraq’s south - Rumaila led by BP, West Qurna-1 run by US major Exxon and Zubair operated by Italy’s ENI - since 2010 when they signed a series of service contracts with Baghdad.